Review: Road from Mont Pelerin

What is “neoliberalism”, and who is responsible for it? Economist John Williamson once wondered whether it was anything “more than an intellectual swear word.” Certainly on the left, certainly outside the US, that is how it used. Take a typical Bernie Sanders tirade against “corporate power”, substitute “neoliberal power”, and you’ve got the flavor.

A recently republished volume tackles this question from the careful perspective of expert historians and scholars. While neoliberalism is today laid at the doorstep of Ronald Reagan and Margaret Thatcher, “The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective” retraces the origin story back to 1947. That was the year that a group of upstart libertarian-leaning scholars met in Switzerland to found the Mont Pelerin Society. Centered around economist and philosopher Friedrich Hayek, the academic/social convening group would go on to cultivate Nobel Prize winning economists and the leaders of today’s top right-leaning and libertarian think tanks.

The book is edited by Philip Mirowski and Dieter Plehwe. They pull together case studies on the origins of the movement in France, UK, US, and Germany; and the impact of the movement on Chile, Peru, and the UN.

The best chapters cover the evolution of Mont Pelerin thinking on core issue areas -labor unions, corporate monopolies, and economic development. Spoiler alert: libertarian positions on these questions were more varied than they appear today.

Take the chapter on unions. Yves Steiner shows that Swiss and German participants in the 1947 Mont Pelerin conference approved of unions as a tool to re-educate workers about market-favoring values. Contracting between private-sector unions and private-sector employers could also foreclose the need for intervention by state labor ministries. However, a wave of labor legislation in the US prompted American participants to see matters differently. Unions were only possible, in this story, due to the state sanctioning of the coercive closed shop. This coercion against the individual leads to monopolies, which in turn lead to inflation. In the end, US-based scholars – and their patrons from Dupont (which underwrote some MPS events) – won the day.

A similar transformation took place with anti-trust. The chapter by Rob Van Horn shows that Chicago-based economists and German “ordoliberals” in the 1930s and 40s agreed that the state should be active in breaking apart large monopolies – a threat to competition. By the 1950s, however, Chicago economists came around to the view that competition between firms would eventually destroy monopolies, and competition within firms for control would similarly have a salutary effect. Also, they suggested that politicians and courts where too quick to find monopolies were none could be proven. In short, governments’ hamfisted efforts to curtail monopoly would simply take us further from the market – which is to be avoided.

Finally, chapters by Plehwe and Jennifer Bair convincingly detail the almost accidental neoliberal interest in economic development – an association that is now most prominent. Early MPS scholars were more preoccupied with the threat of communism than developmentalist states. The first several MPS meetings did not even feature papers on development. But in 1949, Truman made his famous four points speech advocating state-facilitated aid and development; in the following years, interventions by Argentine economist Raul Prebisch and Bandung Conference participants would argue for the necessity of import substitution-led industrialization. These events grabbed MPS leaders’ attention. They realized that the frontline of the intellectual debate over the role of the state in economies was going to be happening in the Third World, where (thanks to decolonization) there were now many more states to curtail. By 1958, Dupont and other corporate leaders had funded a conference at Princeton University to focus intellectual energy on development issues.

These early MPS development interventions were more philosophical than economic, arguing that lazy cultural traits and politics would get in the way of growth and state-led industrialization. Instead, poor countries should be satisfied with their place in the global value chain, whether as sources of cheap labor, natural resources, or agricultural commodities. If technocratic dictatorships had to tamp down popular demands for a different path, so be it.

It took decades before the spirit of Bandung percolated up into the international governance space more substantially. The New International Economic Order debates at the UN were made possible by the growing political might of oil producing states in the 1970s. By then, MPS members had honed their development critique -and were ready to play the influence game in Washington and other capitals. The rest is history.

Pair this book with Steve Teles’ Rise of the Conservative Legal Movement: you’ll get a good sense of how leveraging university affiliations, government connections, business dollars, and good old-fashioned “bro’ing out” at nice Swiss resorts provide the cement for lasting hegemonic influence.

UPDATE: A few passages show how neoliberals are not totally anti-state; they need a certain type of state. For French neoliberals, “the state creates the framework within which competition is free. It begins to clarify what a neoliberal state must be: a regulator that punishes deviations from the ‘correct’ legal framework.” (p.50) In the German ordoliberal tradition, weak states were those “incapable of defending against the united onslaught of interest crowds. The state is pulled to piece by avaricious interests”. In contrast, they wanted a strong (or “total”) state that could protect itself against democratic demands (p. 111). In other words, courts!